The online brokerage Motif lets you invest in various themes — such as “battling cancer,” which includes biotech companies developing cancer drugs and innovations, or “healthy and tasty,” which invests in companies that sell organic and farm-raised foods.
On Tuesday, the Silicon Valley-based startup is going one step further and launching the “Impact Portfolio,” a way for investors to align their financial goals with their personal values.
Socially responsible investing has gone from the sidelines to center stage, as more investors want to know where their money is going. US Trust’s annual Wealth & Worth survey found that 28% of millennials surveyed had so-called impact investments (up from 17% in 2015).
Despite the increasing interest in impact investing, Motif CEO Hardeep Walia told Yahoo Finance said “this product wouldn’t have launched if Trump hadn’t gotten elected.”
In response to this growing appetite for environmental, social and governance investing (ESG), Motif’s Impact portfolio combines direct stock ownership with a model that includes companies that demonstrate leadership in one of three social values — sustainable planet, fair labor or good corporate behavior.
Through a partnership with MSCI, an independent provider of investment data and analytics worldwide, Motif has scoured the data and corporate social responsibility initiatives to identify “best-in-class companies that meet an investor’s personal as well as financial criteria.”
Take, for instance, Applied Materials (AMAT), a chip-equipment supplier that has cut water consumption by 29% from 2006 to 2012, thanks to recycling efforts. The company is focused on conducting business in a manner that “preserves the environment and protects the health and safety of workers, customers and neighboring communities.”
Meanwhile, 3M (MMM), manufacturer of Post-its and Scotch tape, has teamed up with the United Nations’ Agenda for Sustainable Development, with goals to reduce manufacturing waste by an additional 10% and achieve “zero landfill” status at more than 30% of its manufacturing sites by 2030.
Motif will start with these three values and then launch a new value each month, according to Walia. Eventually, you will be able to invest in companies that champion gay rights and women’s rights, among other values.
Walia has seen a surge in interest in sustainable investing and smart money since Trump got elected.
Trump, among other actions, has promised to withdraw from the Paris Agreement on climate change and his administration is expected to reconsider emissions standards for automakers.
And it appears that now, more than ever, people are realizing that their money speaks volumes.
This is in line with what’s been happening on the consumer front. Grassroots campaigns like #GrabYourWallet call on consumers to boycott retailers that sell Trump products, while “Sleeping Giants” is “trying to stop racist websites by stopping their ad dollars.”
When asked whether he’d consider a Motif that tracks stocks that have done well since Trump got elected — the Trump trade, if you will — Walia said that’s a frequent request but has decided against it, for now.
But you can still participate in Trump stock trades with existing Motifs, like “modern warfare,” Walia pointed out. As the description of the Motif explains, “while growth in military spending is likely to decline, spending on advanced weapons systems could continue to increase” under Trump’s administration.
Do investors actually care?
In January, Motif conducted a national survey of customers and non-customers to better understand Americans’ motivations and behaviors when it comes to investing.
According to the survey, 84% of Americans said personal values were somewhat or very important when putting their money to work. Sixty-four percent of American investors don’t have a clear understanding of their investment holdings and 72% have no idea whether their investments align with their values, according to the survey.
Given this context, Walia said it was vital for Motif to launch this new product.
“Users are telling us that values matter and they want us to show them where their money is going,” he said. “Your investing dollars have a much bigger impact than your consumption dollars.”
Based on the specific value you choose to focus your portfolio, the investment model removes companies that aren’t aligned with that value and replaces them with equivalent exposure. The model is deeply rooted in transparency, showing investors not only the breakdown of equities and bonds, but also the specific companies that now make up your basket.
And if you’re concerned that your returns will be affected by the rejiggering to prioritize based on your values, Motif is trying to ensure that your portfolio’s performance won’t suffer.
In fact, Walia told Yahoo Finance the data reflects otherwise. “Doing good is not only good for your soul but it’s also good for your financial planning,” he said.
Last year, the S&P 500 ESG index returned an average of 14.5% compared to the S&P’s 12% return. Of course, past performance does not guarantee future returns.
Walia built Motif seven years ago to give investors the opportunity to tailor-make their weighted baskets of up to 30 stocks and ETFs built around themes and investing styles.
He says the biggest misconception about young adults is that they’re not interested in investing.
“They want to invest; they just don’t have the money and the liberty to, and don’t have access to information about the companies that they’re investing in.”
As more investors put their money where their mouths (and values) are, companies may be incentivized to alter their own business models so not to hurt their bottom lines.
Melody Hahm is a writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Follow her on Twitter @melodyhahm.
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